After mostly very positive results from chipmakers and suppliers, Intel issued a weak forecast, interrupting a six-day tech rally fueled by a robust earnings season, high sales expectations for AI/chips and hopes for lower interest rates.
The S&P 500 fell 0.2% in pre-market trading and the Nasdaq 100 fell as much as 0.4%, with Intel leading the losses and currently trading 11% lower in pre-market trading. Other chip stocks are also trading slightly lower, including the high-flyers AMD, Broadcom and Nvidia. However, optimism for the US equity market remains intact as the US economy remains robust with strong growth and continued expectations of rate cuts from the Fed and ECB despite hawkish comments.
Sentiment in Europe received a strong boost from positive results from luxury goods giant LVMH, which once again reported strong demand from China despite disappointing economic growth there. LVMH jumped by more than 10% and also boosted other luxury stocks. The Stoxx 600 index rose to a two-year high and is currently trading more than 1.0% higher.
The prospect of a soft landing for the US economy was confirmed by yesterday's strong US GDP data. Markets now await further evidence of price pressures in the US from the release of the core personal consumption expenditures index, the Fed's preferred measure of underlying inflation. I expect the recent decline in core prices to continue, which would then keep expectations high for upcoming rate cuts and provide a renewed tailwind for equities and bonds.
In Asia, the positive impact of the recent Chinese stimulus announcement faded and stocks in China and Hong Kong fell after the biggest three-day rally since 2022. However, not only is China propping up its domestic stock market, but international investors are also pouring more money into Chinese equity funds, a possible sign that investors are looking to re-enter the battered market.
Oil prices have fallen slightly as the additional tailwinds from China have had less of an impact on oil prices. Gold is supported by a slight decline in yields and will be influenced by the upcoming PCE data.
We see mixed markets, especially at the regional level, with European equities outperforming (for a change), but overall optimism remains. We have seen a good mix of data, including earnings. Unless inflation turns out to be much higher than expected, the current rally will continue and even if it does – optimism is high, which will support equities in the coming days.
👁 ROB'S MARKET OVERVIEW:
January 25, 2024
⚠️ We expect PCE data to show the moderation in US inflation to continue
🌐/🇺🇸 Global/US Markets ↘️/↕️/↗️ (mixed markets; early losses due to Intel to flatten out)
Cyclical Stocks ↕️/↗️
Tech/Growth Stocks ↘️/↕️/↗️
Financial Stocks ↗️
Defensive Stocks ↗️/➡️
Energy Stocks ↘️
Materials Stocks ↘️ (correction after recent gains)
EUR, CHF, AUD ↗️/➡️
GBP, JPY ➡️
USD ↘️/➡️ (USD to stabilize but facing more headwinds if inflation cools further)
⚡️Cryptos ➡️/↗️ (Bitcoin edging higher again after demonstrating support at $40K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)